Defensive S-Reits emerge as analysts’ top picks amid macro jitters

[SINGAPORE] Analysts recommend defensive Singapore real estate investment trusts (S-Reits) as the sector enters the upcoming first quarter results season under a cloud of renewed macroeconomic uncertainty.

Macquarie Equity Research in a Monday (Apr 13) note highlighted CapitaLand Integrated Commercial Trust (CICT) and Parkway Life Reit as its top Singapore defensive plays.

CICT is also favoured by CGS International (CGSI), it said in a Saturday note, for its “visible” forecasted distribution per unit growth for FY2026 and “potential value creation through asset enhancement initiative opportunities within its portfolio”.

For investors looking for a potential rebound should the conflict end, Macquarie pointed to CapitaLand Ascendas Reit (Clar) , Mapletree Logistics Trust , Mapletree Pan Asia Commercial Trust and Frasers Logistics & Commercial Trust .

CGSI also noted that it liked Clar for its “diversified and resilient portfolio, inorganic growth from the recent S$1.4 billion worth of acquisitions and healthy balance sheet”.

The brokerage maintains its “overweight” rating on S-Reits, citing inexpensive valuations and a 350 basis point yield spread over the 10-year Singapore bond yield.

Macquarie noted that S-Reits with larger Singdollar-denominated debt, such as CICT and Frasers Centrepoint Trust , will likely remain “relatively more resilient” if local rates stay low.

Potential negative factors

CGSI said: “Some of the downside risks for S-Reits in this reporting season would come from higher-than-expected funding costs due to the expiry of debt hedges or refinancing activities, or reduced capital top-ups and a lower proportion of fees in units, which could drag DPU performance.”

Its analysts also cautioned that “macro headwinds” such as slower global growth, heightened inflation risks and asset value depreciation for China properties could persist.

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Macquarie added that overall travel could be “dampened should inflation start to affect discretionary spending”.

The Monetary Authority of Singapore tightened monetary policy on Tuesday and raised its inflation forecasts, as the Middle East conflict and disruption to shipping through the Strait of Hormuz drive up imported energy and commodity costs.

The central bank increased slightly the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, while keeping its width and centre unchanged.

The central bank also raised its core and headline inflation forecasts to 1.5 to 2.5 per cent for 2026, from 1 to 2 per cent previously.

While analysts from CGSI expect “mainly positive operating performances” for S-Reits, both they and Macquarie are advising a defensive posture as the “higher-for-longer” interest rate narrative gains fresh momentum.

The sector has retraced about 5 per cent year-to-date, with the bulk of the dip occurring after the onset of the Middle East conflict, CGSI analysts noted.

This tension, coupled with rising oil prices, has raised concerns over higher inflation and led markets to dial back expectations for US Federal Reserve rate cuts in 2026, CGSI added.

Resilience in the face of headwinds

Despite the cautious outlook, Macquarie analysts stated that the sector has already “priced in the majority of the rate hike risks ahead of actual rate increases”.

CGSI predicted that S-Reits enjoyed high portfolio occupancy in Q1, particularly for Singapore-centric portfolios, due to robust leasing demand.

This is “with the exception of business parks space in Singapore and selected US business spaces, which should remain modest”, CGSI analysts said.

Positive reversions are expected across the office, retail and industrial segments, excluding China.

As for the hospitality sector, Singapore hotels saw a significant boost in February 2026, with tourist arrivals rising 9 per cent year on year to 1.5 million, according to Macquarie. In that month, hotel occupancy spiked to 88 per cent.

CGSI said it would “keep a close watch” on the narrative around the potential impact of the Iran war on future operating performances, particularly in hospitality.

For the upcoming earnings period, Macquarie will monitor if Reits have started refinancing and increased hedging positions prior to potential hikes, their utility cost hedging positions and potential impacts from the Iran conflict.

Both brokerages note that most S-Reits have utility contracts that are “well hedged” or “largely fixed” through 2026, which should keep expenses stable despite rising energy prices.